A Turkish company that pays a foreign company for anything other than goods is a tax collector before it is a customer. Article 30 of the Corporate Tax Law makes the payer withhold corporate tax when the payment is made or booked, at rates a Council of Ministers decision of 2009 still sets: twenty per cent on services, royalties and rent, ten per cent on interest to a lender that is not a bank, fifteen per cent on dividends and branch remittances. In my files the withholding is discovered late and from the wrong side: the German engineering firm paid eighty per cent of its invoice with a tax receipt for the rest, the American parent whose management fee was taxed in the month it was booked, the British shareholder whose loan cost ten per cent more than a bank's. The treaty usually helps, and for services it often removes the Turkish tax entirely, but only if the paperwork the Revenue Administration's 2017 communiqué requires is in the payer's hands before payment. This page sets out the mechanism, the 2026 rates, the treaty layer for the United States, the United Kingdom and Germany, the certificate and the refund, the VAT, and the gross-up rule that decides who really bears the tax.
Sources, checked 9 September 2026. Corporate Tax Law No. 5520, Articles 3(3) and (4), 30 and 31; Income Tax Law No. 193, Articles 7, 8, 94, 98 and 119; Council of Ministers Decision 2009/14593 (Official Gazette 27130, 3 February 2009) as amended by Presidential Decisions 476 (Official Gazette 30630, 19 December 2018), 3491 (Official Gazette 31385, 4 February 2021), 4936 (Official Gazette 31697, 22 December 2021), 9284 and 9286 (Official Gazette 32760, 22 December 2024) and 9707 (Official Gazette 32857, 30 March 2025); Value Added Tax Law No. 3065, Articles 6, 9 and 29; Tax Procedure Law No. 213, Articles 114, 126 and 156; Double Taxation Agreements General Communiqué Series No. 4 (Official Gazette 30192, 26 September 2017); the Revenue Administration's 2026 guide on corporate tax rates and the Kayseri Tax Office ruling of 2 November 2023; the Turkey-United States (1996), Turkey-United Kingdom (1986) and Turkey-Germany (2011) income tax treaties, Articles 5, 7, 11, 12 and 14.
Why the Turkish payer withholds: Article 30 and the accrual trap
A company whose legal seat and place of management are both outside Turkey is taxed only on income obtained in Turkey. Article 3(3) of the Corporate Tax Law lists that income: commercial profits made through a Turkish workplace or permanent representative, professional service income obtained in Turkey, rent from property in Turkey, and investment income obtained in Turkey. Article 3(4) sends the question of when income is obtained in Turkey to Article 7 of the Income Tax Law, and that is where Western clients are caught: a professional service is Turkish-source if it is performed in Turkey or "evaluated" in Turkey, and evaluation means that the payment is made in Turkey or, if made abroad, charged to the accounts or the profit of the Turkish payer. A study written in Chicago, delivered by e-mail and paid by a Turkish company is Turkish-source income under domestic law.
Article 30(1) then makes the payer the collector: whoever pays or accrues the listed income to a non-resident company, advances included, withholds corporate tax. Article 30(10) defines payment "on account" as any record that shows the payer as the recipient's debtor, so the invoice booked in December creates December's withholding even if the money leaves in March. Article 30(11) taxes the gross amount and grosses up any tax the payer bears. Article 31 sends the tax to the payer's tax office on the monthly withholding return, with payment by the twenty-sixth of the following month under Article 119 of the Income Tax Law. For the recipient the withholding is in practice final: Article 30(9) lets a non-resident company file a Turkish return for such income but does not require it, unless the income is commercial profit of a Turkish workplace, in which case the return is due and the withheld tax is credited against it.
The statutory rate in every paragraph of Article 30 is fifteen per cent. Article 30(8) lets the President set the rate by type of income, down to zero or up to double, and the rates actually applied are those of Decision 2009/14593, amended six times since; the Revenue Administration's 2026 rates guide confirms it.
The rates in 2026, and the decisions that set them
| Payment to a non-resident company | Rate | Basis |
|---|---|---|
| Professional and technical services: consulting, engineering, design, legal, IT, management fees | 20%; 5% for petroleum exploration | 2009/14593, item 2 |
| Sale, transfer or licensing of copyright, patents, trademarks, know-how, franchise and similar rights | 20% | Item 11; Article 30(2) |
| Rent of property, equipment or rights located or used in Turkey | 20%; 1% under the Financial Leasing Law | Item 3 |
| Interest to foreign states, international institutions, foreign banks and foreign lenders licensed at home to lend to the public | 0% | Item 5(a) |
| Interest on banks' subordinated loans and securitisation borrowings | 1% | Item 5(b) |
| Interest embedded in supplier credit on goods | 5% | Item 5(c) |
| All other interest, including a shareholder or group-company loan | 10% | Item 5(ç) |
| Dividends to a non-resident company without a Turkish workplace | 15% since 22 December 2024; 10% from 22 December 2021 | Item 12; Decisions 4936 and 9286 |
| Profit a Turkish branch transfers to head office after corporate tax | 15% | Item 14; Decision 9286 |
| Progress payments on construction and repair works spanning more than one calendar year | 5% since 1 March 2021; 1% for rail, tram, metro and urban rail works and shipbuilding since 1 April 2025 | Item 1; Decisions 3491 and 9707 |
| Internet advertising services | 15% since 1 January 2019 | Decision 476 |
| Payments by e-commerce marketplaces to sellers with a Turkish workplace | 1% since 1 January 2025 | Article 30(1)(e); Decision 9284 |
| Any payment to a company in a country the President declares low-tax and non-cooperative | 30% | Article 30(7); no list published to date |
The interest column rewards the lender's licence, not its nationality: a Frankfurt bank lends at zero, the German parent at ten. And the dividend and branch rates moved in December 2024 after three years at ten; that side is on the dividend withholding page.
What counts as a professional service: wider than the label
The Turkish term is serbest meslek kazancı, and a Western reader hears "lawyers and architects". The administration hears any service bought from abroad that is not a sale of goods. A Kayseri Tax Office ruling of 2 November 2023 is a fair sample: a Turkish importer paid Iranian companies for sourcing and procurement services on the goods it bought, and the ruling held the fees to be professional income subject to twenty per cent withholding under Article 30(1)(b), subject first to the Turkey-Iran treaty, and deductible if the service was actually rendered. Consulting, supervision, testing, certification, software development, training, market research and the group management fee sit in the same box.
Three lines belong in the contract before payment. Goods against services: goods sold to Turkey without a Turkish workplace are commercial profit that Turkey does not tax, so a contract that bundles equipment, installation and training into one price invites the payer, or later an inspector, to treat the whole as a service; in my practice the three are priced separately. Service against royalty: a software payment is the price of a copy for own use in one reading and a copyright licence in another, and the answer turns on the rights conveyed, not on the invoice wording. Performed abroad against performed in Turkey: irrelevant under domestic law, because payment from Turkey suffices, but the whole case under the treaty.
The treaty layer: business profits, permanent establishment and the 183 days
Each of the three treaties allocates business profits to the residence state under Article 7 unless the foreign company has a permanent establishment in Turkey. Under Article 5(3) of the American and British treaties a building site or a construction, assembly or installation project is a permanent establishment only if it lasts more than six months. The German treaty says the same in Article 5(3)(a), adds supervisory activities connected with the site, and in Article 5(3)(b) adds a service permanent establishment: services, consultancy included, furnished through personnel present in Turkey for more than six months within any twelve-month period for the same or a connected project. A German firm that keeps engineers on a Turkish site for seven months therefore has a Turkish permanent establishment, files a Turkish return on the attributable profit, and the client's withholding is credited against that tax.
The American and British treaties handle services through Article 14(2): income of an enterprise from professional services or similar activities is taxable only in the residence state unless the services are performed in Turkey and either a permanent establishment or fixed base is used or the performance in Turkey exceeds 183 days in any continuous twelve-month period. In those cases Turkey may tax the attributable income, may collect it by withholding, and the recipient may elect net-basis taxation under Article 7. Article 14(1) of both treaties, and Article 14 of the German one, apply the fixed-base and 183-day tests to individuals. For a Western service company with no Turkish office, work performed at home, or in Turkey during visits totalling less than 183 days, is not taxable in Turkey, and the domestic twenty per cent falls away.
General Communiqué Series No. 4 of 2017 tells the payer how to apply this. It names the three elements that give Turkey a taxing right, a workplace or fixed base, a stay exceeding six months or 183 days, and in a few treaties payment from Turkey. It counts an enterprise's days by the physical presence of its personnel, per project, adding the periods of the same or a connected project. It then puts the risk on the payer: where at the time of the contract or payment it cannot be clearly known whether the provider will exceed the treaty period, the payer must withhold; and where later events create the right, an extended service or a workplace opened, the payer must withhold retroactively for the earlier periods. A Turkish client that stops withholding on a consultant's assurance is the one assessed if the consultant stays.
Working through a branch rather than a subsidiary, and what a Turkish workplace obliges the foreign company to file, is on the liaison office, branch and subsidiary page; staff sent to Turkey for a project raise the questions on the employment law page; and a payer set up in a free zone, whose own exemptions do not extend to the tax it withholds for others, is on the free zone page.
Royalties and interest: what the three treaties cap
| Treaty | Royalties, Article 12 | Interest, Article 11 | Construction permanent establishment, Article 5 | Services |
|---|---|---|---|---|
| Turkey-United States, 1996 | 10%; 5% for industrial, commercial or scientific equipment | 15%; 10% where the lender is a financial institution such as a bank, savings institution or insurer | more than six months | Article 14(2): 183 days in twelve months; withholding with net-basis election |
| Turkey-United Kingdom, 1986 | 10% | 15%; government interest exempt | more than six months | Article 14(2): 183 days in twelve months, same election |
| Turkey-Germany, 2011 | 10% | 10% | more than six months, supervision included | Article 5(3)(b): service permanent establishment after six months in twelve for one project; individuals 183 days under Article 14 |
Against the domestic table, the treaties do three different things. On royalties they halve the Turkish tax from twenty to ten per cent, the largest single saving for a licence of technology or brand into Turkey, and the American treaty caps equipment rentals at five per cent where domestic law taxes them as rent at twenty. On interest they mostly change nothing: a parent-company loan is taxed at ten under domestic law, below the American and British ceilings and equal to the German one, and a foreign bank's loan is at zero regardless. On services they can eliminate the tax rather than cap it. One German detail: the protocol to the German treaty, with reference to Articles 7 and 14, provides that payments for technical services, studies and surveys of a scientific, geological or technical nature, engineering contracts including blueprints, and consultancy or supervisory services are business profits or independent services, not royalties.
The residence certificate, the four-month rule and the refund
Treaty relief is not automatic. Under section 3.3.2 of the communiqué the foreign recipient obtains a certificate of residence from its own competent authority and delivers the original, with a Turkish translation certified by a notary or a Turkish consulate, to the Turkish payer, who keeps it for inspection. Without it the payer applies domestic law, twenty per cent on the fee whatever the treaty says. A certificate for a calendar year is valid until the fourth month of the following year.
Where the treaty leaves Turkey no taxing right, section 4.2 adds two forms: the provider completes form no. 1 and gives it to the payer within thirty days of the start of the service, and the payer files form no. 2 with its tax office before the payment, attaching form no. 1 and the contract, for instalments before the first one.
Where tax was withheld and the treaty says it should not have been, section 5 gives the recipient a refund application to the Turkish tax office with the residence certificate and form no. 3, within the correction limitation period; under Articles 114 and 126 of the Tax Procedure Law that is five years from the start of the year after the year the tax arose. I have used the route; it is slow, and the money sits in Ankara while it runs. The paperwork before payment is worth more than the claim after it.
The VAT that travels with the payment
Withholding is corporate tax; value added tax follows the same payment by a separate road. Under Article 6(b) of the VAT Law a service is supplied in Turkey if it is performed or benefited from in Turkey. Article 9(1) lets the Ministry make the recipient liable where the supplier has no residence, workplace, legal seat or place of management in Turkey, and it has done so for imported services: the Turkish recipient declares reverse-charge VAT at the general rate, twenty per cent since July 2023, and deducts it on its ordinary return. Since 1 January 2024, under Article 29(1)(ç) added by Law 7491, the deduction is allowed only once the reverse-charge tax has been paid. For a fully taxable Turkish company the exercise is cash-neutral; for a bank or an insurer with exempt turnover it is a real cost. A contract silent on whether the price excludes Turkish VAT and withholding will produce a dispute about both.
Gross-up: who really bears the twenty per cent
Article 30(11) computes the withholding on the gross amount and, where the payer bears the tax, on the sum of the amount paid and the tax assumed. A "net of Turkish taxes" clause therefore shifts twenty-five per cent, not twenty: a fee of one hundred payable net at the twenty per cent rate becomes a base of one hundred and twenty-five and a withholding of twenty-five. The provider's side is the mirror: a foreign company whose home state credits Turkish tax under the treaty's relief article recovers some or all of the withholding at home, so a gross-up that makes the Turkish client bear a tax the provider would have credited is a gift to the provider's treasury. The contracts I draft state the price exclusive of Turkish withholding and VAT, place the certificate and forms on the provider, permit the payer to withhold where Turkish law requires it, and oblige the payer to deliver the tax receipt within a fixed period.
Whose side we are on, and how we are paid
The Turkish accountant who books the invoice is paid whether or not the treaty is applied. The foreign provider's adviser is paid by the provider and drafts the gross-up clause accordingly. None of them is paid to tell the payer that the certificate is missing, or the provider that a deduction it could have avoided has just been credited to Ankara.
We take no commission or referral fee from accountants, banks or corporate service providers, in any form, on any file. The fee you pay us is our only income from your matter, and it does not depend on whether tax is withheld or on the size of the contract. Because our position does not move with the payment, telling a provider that its contract is taxable in Turkey, or a payer that it must withhold on a consultant it trusts, costs us nothing to say.
One boundary, stated plainly. We are lawyers, not licensed investment advisers and not your home-country tax preparers. We do not tell you what your own state will credit. What we protect is the Turkish legal position: the characterisation of the payment, the rate on the date it is booked, the treaty article that fits the facts, the certificate and forms that make the relief hold on inspection, and the clauses that decide who bears the tax if the facts change.
Before you sign the service contract
Send us the draft contract, where and by whom the work will be performed and for how long, the provider's country of residence and legal form, and whether the price is meant to be net or gross. We will tell you what the payment is in Turkish terms, the rate, whether a treaty removes or reduces it and what must be in the payer's file before the first payment, and how to draft the price, withholding and tax-receipt clauses. Our cross-border tax work is described on the international tax page, and the set-up questions that precede these contracts on the company formation page.
What this page does not settle
Payments to non-resident individuals follow the parallel rules of Article 94 of the Income Tax Law. Treaties with other states carry their own rates and thresholds; the American and British individual positions are on the US treaty page and the UK treaty page. Transfer pricing, financing expense limits, permanent establishment profit attribution, the 2025 marketplace withholding and the incentive regime on the incentives page are separate subjects. Withholding rates are set by Presidential decision and change; the rates above are those in force on the date checked.
